Investing is a beautiful thing. It allows you to turn your capital into more capital, and as you would expect, this concept is incredibly appealing to a large community of people. Moreover, celebrities are certainly no exception to this rule.
Stock trading is incredibly common within the celebrity circuit, and almost all intelligent celebrities choose to put at least a little of their capital into stocks, bonds, commodities, and crypto. However, this also begs the question; do investments contribute to a celebrity’s net worth? Well, this is exactly what we are going to be talking about in this article.
Assets Are as Much of a Part of a Celebrity’s Net Worth as Real Cash
If you are not all too familiar with how valuations are calculated, you may even be asking yourself the question “what is net worth?”. Furthermore, getting a firm grasp of this concept will also give us half of the picture when it comes to whether or not investments are calculated into net worth.
The definition of net worth is as follows; the total wealth of an individual, company, or household, taking account of all financial assets and liabilities. Just from the direct definition, you can already get a pretty good idea about what would and wouldn’t be considered a contributing factor to net worth.
As you can see, assets (investments) are clearly defined as being a contributor to net worth, and for the most part, this has already answered the question of this article. Investments are as much of a part of a celebrity’s net worth as cars and houses, and many celebrities happen to have the vast majority of their capital tied up to certain financial assets.
Moreover, because of the way investments work, not factoring them into net worth would be to cut many celebrities’ net worths in half. Not all celebrities spend every cent they get on jewellery and fashion. No, the intelligent ones choose to invest a sizable portion of their overall capital in garnering financial assets, and just because a certain celebrity might not look all too wealthy on the outside; looks can be deceiving.
This is why the wealthiest individuals do not flaunt their money through fancy cars and expensive possessions – almost all the money they get goes straight into investments.
However, investments do not contribute to net worth in the same way that regular possessions do. In fact, due to how investments work, things can begin to seem a little complicated when you try to factor them into net worth.
Potential Valuations are Not Taken Into Consideration
Investments always have the potential to go up or down. No matter how certain you are that investment is going to bear fruit, you can never guarantee that this will come to fruition, and this means that you need to be extremely careful when factoring investments into net worth.
Investments are always valued at their current value, not their potential value. This sounds pretty simple at first, but it also has some pretty interesting connotations.
To give an example; if someone decided to invest ten million into a cryptocurrency while it is on a decline with the hopes of a huge price jump occurring in the near future, only the current value of the investment can contribute to their net worth.
This means that an investor’s true net worth may be well off the mark if they have millions sitting at the bottom of declining investment, and the potential for them to be worth much more in the following days if the value of their investments shoots up is always there.
Are All Assets Good For Net Worth?
Something that is worth noting is that not investments add to net worth, and in fact, some can actually make your net worth go down. For example, if a celebrity were to buy a new holiday home, their net worth would be unaffected at first.
One hundred million is one hundred million whether it be sitting in a bank or taking the form of a new holiday home, and the initial purchase would make no difference on overall net worth.
However, if said holiday home had an upkeep cost of thirty thousand a week, the celebrity in question would be directly losing money because of this investment, and this cash leak would also be factored into their net worth.
To sum up the entire contents of this article; yes. Investments absolutely contribute to a celebrity’s net worth, and in fact, a sizable chunk of most celebrities’ net worths are made up of investments in the stock market. Although, this doesn’t only apply to celebrities.
The actual/current value of any investments someone may have is always accounted for in their net worth, and this is true no matter if you have one million in investments or one pound. What you do with this information is up to you – but at least you know the full picture when it comes to the discussion of how net worths are calculated. Catch you in the next one.